Loan restructurings decelerated to €1,3 billion in 2022 after reaching their highest level in 2021 due to the Covid-19 pandemic.
According to data published by the Central Bank of Cyprus, total renegotiated loans in 2022 declined to €1.3 billion following their spike at €2.32 billion in 2021, which was the highest level since 2015 when the CBC began reporting data on restructured facilities.
The overwhelming majority of restructured loans were corporate facilities over €1 million which amounted to €1.1 billion, corresponding to 83% of total loan restructurings last year.
Restructured corporate loans up to €1 million declined significantly to €74 million compared with €74 million in 2021.
According to the data, restructured housing loans amounted to €107 million in 2022, compared with €220 million in 2021, whereas restructuring of other loans were just €24 million throughout 2022 compared with €71 million the year before.
Renegotiated consumer loans were €18.6 million in 2022 compared to €34 million in 2021.
According to the latest data, total restructured loans amounted to €3 billion in end-October, of which €1.29 billion continues to be classified as non-performing. This amount includes €0.54 billion in household loans and €0.5 billion in corporate credit.
Loan restructurings are considered as crucial in 2023 as borrowing costs are on the rise in the context of the ECB’s monetary normalisation in a bid to tame the rising inflation, impacting both businesses' and households' repayment capacity.
Conversely, in the CBC latest economic bulletin, Governor Constantinos Herodotou pointed out that timely and appropriate restructurings are key.
“Undeniably, viable restructuring solutions offer both businesses and households the capacity to comply with their obligations. In this way banks’ balance sheets are not burdened with new defaults, while the smooth business operation is continuing, limiting bankruptcies thus contributing to the smooth functioning of the economy,” he said.